[Claim for Pay Retention and Cost-of-Living Allowances]

GAO was requested to decide whether a civilian Coast Guard employee who was receiving pay retention benefits because of the reclassification of his position from the prevailing wage system to the General Schedule (GS) was eligible to receive a 25-percent cost-of-living allowance. The Department of Transportation (DOT) contended that the rate of pay for the employee's wage system position was based on prevailing wages in his locality and contained cost-of-living considerations; therefore, payment of the 25-percent cost-of-living allowance payable to GS employees in the locality resulted in a windfall to the employee. DOT suggested that the employee be paid the greater of either his retained rate of pay increased by 50 percent of comparability or the GS pay rate plus a cost-of-living allowance of 25 percent of that basic pay rate. GAO found that, since the employee's prior basic pay rate exceeded the maximum pay rate for his GS grade level, he was entitled to retain the prior rate. In addition, he was entitled to 25 percent of the cost-of-living allowance for his locality computed on the basic pay rate for his GS grade and step level. Accordingly, the employee was entitled to receive the full cost-of-living allowance for which he was eligible based on the maximum rate of basic pay for his GS position.